PDF Summary:The Master Guides: Negotiation 101, by Shortform

In our daily lives, we all negotiate with others for things we want, whether the context is business or personal. For instance, at work you may negotiate a contract with a supplier or a pay raise with a supervisor, while in your personal life you might negotiate with your friends about which movie you’re going to see. In any situation where you’re looking to get something from someone else, you’re engaged in a negotiation.

In Shortform’s Master Guide to negotiation, we’ve synthesized the ideas and recommendations from some of the world’s leading experts on negotiation to help give you a competitive edge the next time you sit down to bargain. We’ll explore the two main approaches to negotiation (the emotional approach and the rational approach); show you how to prepare for your negotiation; and walk you through some specific moves and countermoves to get the best deal for yourself when you’re sitting face-to-face with your counterpart.

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They recommend some important preparation tactics:

• Think about the end: Before starting to negotiate, think about what a good agreement would look like. To get there, what issues would have to be resolved? What kind of agreement could both you and your counterpart justify to yourselves? Envisioning the end result will help you stay on track.
• Draft a framework agreement. Create a document that outlines a potential agreement with spaces for each item to be resolved. It can serve as an agenda, help keep discussions focused, and ensure important issues are addressed.

You also need to set yourself up so that you’re not surprised by the twists and turns of a negotiation. In The Art of the Deal, Donald Trump writes that you need to prepare for the worst: No matter how well it seems to be going, any deal can fall through. If you act conservatively and prepare for this worst-case scenario, you’ll protect yourself against loss or failure.

For example, if you’re negotiating the starting salary for a job offer you’ve received, you might prepare for the worst by researching the salary range for comparable positions. Knowing the lowest end of the estimated salary range will give you a good baseline to know if your potential employer is lowballing you. If the worst happens and their initial offer is at the bottom of the range (or maybe even lower), you can plan your countermoves accordingly (a topic we’ll explore in greater depth in the next section).

Similarly, Trump emphasizes the need to have a backup plan. Even if a deal doesn’t fall through, conditions can change. Have a plan B, plan C, and even plan D—and be flexible and agile enough to pivot to any of them. To continue with our salary negotiation example, your backup plan for a lowball offer might be to make a list of your achievements, skills, and unique strengths as a candidate that demonstrate your value to the company.

Know Your Moves (and Your Counterpart’s)

On a more tactical level, Voss (Never Split the Difference) cautions that to prepare for a negotiation, you need to plan some specific dodge-and-counterpunch moves to use—especially when you’re going up against a seasoned negotiator.

Dodging Tactics

These are what you do to deflect your counterpart’s “punches”—aggressive threats, demands, and deadlines they may throw at you to pressure you into making a deal on their terms. You can use open-ended questions to say “no” without actually using the word, or pivot to non-monetary terms. Say things like, “Let’s put price aside for now. What else can you offer that would make this a good deal for me?”

Strategic Umbrage

You need to be prepared to hit back without getting angry. Voss champions a technique psychologists call “strategic umbrage.” This means being genuinely angry (not faking it), but in control of your emotions. The key to strategic umbrage is getting angry at the offer being made—not the person making it. Saying, “I’m afraid there are no circumstances that would make that proposal work for me” in a displeased—but measured—tone is a good way to leverage a little bit of anger to your advantage.

Nonstrategic umbrage would mean letting your angry emotions completely dictate your negotiating posture in a way that’s counterproductive. In practice, this would involve losing your cool and making personal attacks against your counterpart by saying things like, “If you think I’d even consider that pathetic excuse of an offer, either you’re an idiot or you think I am.”

Determine Your Boundaries for the Negotiation

Negotiation experts write that there are a few tools you can use to determine your boundaries for the negotiation—specifically, when you’d walk away from a negotiation, your minimum conditions for a deal, and the range of outcomes that would be acceptable to both you and your counterpart.

Find Your BATNA and Learn When to Walk Away

Fisher and Ury write that one tool to prepare for a negotiation is to determine your best alternative to a negotiated agreement (BATNA). Knowing your BATNA helps you decide when and whether it’s better to accept the deal or to walk away.

Their logic for using BATNA is this:

1. The purpose of negotiating is to get better results than you’d get without negotiating.
2. Therefore, when negotiating, you need to know your best alternative to negotiation in order to know whether to accept an agreement.
3. Once you know this, measure any proposed agreement against your best alternative or BATNA. It will protect you from accepting a bad agreement, as well as from rejecting a good agreement.

RV and ZOPA: Finding You and Your Counterpart’s Conditions for a Deal

In Negotiation Genius, Malhotra and Bazerman supplement Fisher and Ury’s BATNA concept with two additional negotiation benchmarks to determine ahead of time: the RV and the ZOPA.

Your reservation value (RV) is the worst deal you’re willing to accept in your current negotiation. For example, this might be the highest price you’re willing to pay or the lowest price at which you’re willing to sell. They recommend figuring out what your counterpart’s RV is as well.

Your zone of possible agreement (ZOPA) is the space between your RV and your counterpart’s. For example, if your lowest selling price is $10,000 and the highest your counterpart’s willing to pay is $15,000, then the ZOPA is between $10,000 and $15,000. This range gives you a more tangible measurement of how much value you can either claim or surrender during a negotiation. To claim the most value, you want to make a deal as close to your counterpart’s RV (their worst potential deal) as possible.

Know What Type of Negotiator You’re Dealing With

Voss (Never Split the Difference) writes that before you finally get down to the business of negotiating, you need to understand what type of negotiator you’re going up against.

Voss identifies three main types of negotiators: Givers, Calculators, and Aggressives.

Givers

Givers are people-pleasers who tend to be highly sociable and agreeable—but also poor time managers. They’ll often agree to things that they can’t actually follow through on, since they’re so eager to make you happy. When dealing with a giver, Voss recommends focusing on implementation—getting details on how and when they’ll actually follow through on their commitments.

Calculators

Calculators are methodical and diligent people who want to assess all the facts before committing to a decision. As a result, they’re fairly unconcerned with time and less likely to be pressured by deadlines. When dealing with a Calculator, Voss recommends using clear, unambiguous data to back up your assertions. Also, don’t ad-lib, and avoid giving them any surprises.

Aggressives

Aggressives are achievement-oriented people who prioritize getting things done. They hate wasted time and care a lot about meeting—and beating—deadlines. According to Voss, aggressives can be especially vulnerable to time pressures, since the biggest defeat to them is making no deal at all. If you can back them into a corner where they’re facing a deadline, you’ll be in a great position to dictate the terms.

Ury and Fisher (Getting to Yes) identify a similar type of negotiator to Voss’s Aggressives: Hardball negotiators. They offer suggestions for how to handle them.

Hardball negotiators view negotiation as a contest they must win. Their strategy is to take the toughest positions and hold out the longest. Their win-at-any-cost approach exhausts energy and resources and ruins their relationship with the other side. Ury and Fisher write that one of the most effective ways to counter this tactic is to simply call attention to it at the outset. Doing so will blunt the effectiveness of your counterpart’s bluster and cause them to worry that they’ve overplayed their hand and alienated you. As a result, they may drop it.

How to Bargain

Having explored the two main approaches to negotiation and looked at how to prepare, let’s examine how to strike the best possible deal when you’re face-to-face at the negotiating table. In this section, we’ll cover:

• How to take advantage of new information
• How to use the Ackerman model to craft your offer

Take Advantage of Information

Voss (Never Split the Difference) writes that in every negotiation, there is some hidden piece of information that, if it were known, would completely transform the dynamic of the negotiation and the final outcome. Voss writes that there are three types of information.

1) Known Knowns: These are the things you know for sure. In a negotiation, the known knowns are things like your counterpart’s name, their offer, and the knowledge gained from your experience in past negotiations.

2) Known Unknowns: This is information that you know exists but don’t possess yourself. In a negotiation, a known unknown might be your counterpart’s price ceiling (the highest amount they’re willing to pay) or her dealbreaker condition. You know she has these; you just don’t know what they are.

3) Unknown Unknowns: The most important pieces of information, according to Voss, are the unknown unknowns. These are the bits of information that we lack—and, crucially, don’t know that we lack. In a negotiation, those who can best identify and exploit the unknown unknowns are those who come out on top. For example, if you discovered that your counterpart was facing some sort of external financial pressure (from a lawsuit or a job loss), you would have crucial leverage over them, because this information would tell you that your counterpart would likely accept a heavily discounted offer.

Similarly, Malhotra and Bazerman (Negotiation Genius) write that it’s critical to seek out information that negotiators commonly overlook, such as:

1. How the other side makes decisions. Your counterpart may be bound to specific decision-making rules, such as being required to weigh criteria differently or needing to get the approval of a supervisor. By discovering this, you can figure out how to meet these criteria in a way that’s most suitable for you.
2. How strong the other side’s position is. Negotiators may overlook their competitor’s strengths or underestimate how much information they have. To avoid this, the authors recommend you deliberately consider what unique advantages your competitors may have.

Use the Ackerman Model to Craft Your Offer

Voss (Never Split the Difference) recommends what he calls the Ackerman Model as a good alternative to traditional negotiating. Created by ex-CIA operative Mike Ackerman (who later founded a company advising law enforcement on kidnapping situations), this model is based on the offer-counteroffer system. It uses a tapering system that brings the ultimate number (whether it’s the price you’ll be paying or the price you’ll be receiving) closer to your preference.

Voss writes that the Ackerman Model improves on the traditional “split the difference” approach, which tends to produce a mutually dissatisfying result.

Below, we’ll explore some of the key steps in the Ackerman model.

1) Choose a Target Price

This should be ambitious, but reasonable. You don’t want to negotiate with yourself and set your target price too high (if you’re the buyer), but you also don’t want to set it so low that your counterpart would never agree to it. Doing some research beforehand will help you set your goal. Ury and Fisher (Getting to Yes) similarly caution against starting with an unreasonable position, as it can set off a struggle of wills with each side trying to force its position on the other. This leads to mounting anger and resentment—and if the bad feelings linger, it can become hard to reach a deal.

2) Offer 65% of Your Target Price

Thus, if you’re aiming to pay $100,000, your opening bid should be $65,000. This is a starting bid designed to catch your counterpart off guard. Voss writes that an extreme starting bid like this can also trigger your own sense of loss aversion in a constructive way. By starting with a low offer, you’ll start thinking of anything higher than that as a “loss,” which you’ll work hard to avoid. In reality of course, you’re still well below your target price at this point, so even if you move off your opening bid it’s still a “win” for you.

However, Ury and Fisher (Getting to Yes) warn that this sort of “positional bargaining” can compel negotiators to become rigid in their positions to the point where they can’t accept any offer if it doesn’t meet their original position—even if that offer is better than no deal at all. The harder you try to convince the other side of the rightness of your position, and the more you defend it against attack, the more strongly committed to it you become. You feel compelled to maintain consistency with your past positions and to save face by not giving in.

3) Plan Your Counteroffers

When planning your counteroffers, use three increases—but each time, reduce the size of the increase. For example, Voss recommends countering at first with a number that’s 85% of your target price (a 20 percentage-point jump). Then, you increase it to 95% of your target price (only a 10 percentage-point jump this time). If they’re still not accepting this, then finally you meet them at your full target price (which by this point is a modest 5 percentage-point jump).

All of this activates your counterpart’s emotional instinct to be fair, reasonable, and reciprocal. Most people, writes Voss, are naturally inclined to match what they see as generosity toward themselves with generosity of their own toward others—indeed, most people don’t want to feel like they’re freeloaders. So when they see you making what appear to be concessions (even though you’re only really going up to your actual target price), they’ll be more likely to want to match that “generosity” with generosity of their own.

Malhotra and Bazerman (Negotiation Genius) write that you can also respond by making an aggressive counteroffer and then suggesting both sides moderate their offers. You can then take control of the conversation by explaining why you made your counteroffer.

An example of this tactic might look something like this: You're negotiating a salary for a new job. The initial offer is $100,000 per year, but you believe this to be below-market. You might make an aggressive counteroffer by asking for $130,000, arguing that the market rate for the position and your unique skills, experience, and proven track record merit this. But you then concede that this number is much higher than their initial offer and may be beyond what their budget can support.

Having acknowledged this, you then signal a willingness to find a middle ground, telling the employer that you really want the job and are committed to reaching a number that you’re both happy with. You suggest that you both abandon your “extreme” positions and reach a number that makes sense for both parties. You ask for $110,000 and gauge how they react to your concession. Thus, you begin with an aggressive counteroffer to assert your value, but you also recognize the need for flexibility and demonstrate understanding and empathy for the employer's perspective.

5) Signal When You’ve Reached Your Limit

Voss recommends including a non-monetary item along with your final offer to signal that you’re truly at your limit. For example, after you’ve made your final offer in a salary negotiation, you might signal that this is your final offer by shifting the discussion to other elements of the job, like your title, flexible work schedule, and office location. By pivoting to something other than money, you’re sending a message to your counterpart that the monetary portion of the negotiation is over, and you’re ready to move on to other items.

In Negotiation Genius, Malhotra and Bazerman write that it’s important to keep an eye out for the concessions your counterpart is making during the negotiation. When her concessions progressively get smaller, it may mean that you’re approaching her RV—her worst possible deal, the minimum she’d be willing to accept. At this point, she’s probably less flexible about how much she can concede. However, Malhotra and Bazerman warn that your counterpart may also use this as a tactic to confuse you about her real limits—deceiving you into thinking she can’t make any more concessions, when in fact she can.